January 14, 2014
A District of Columbia Circuit Court ruled that the Federal Communications Commission (FCC) could not prohibit internet providers from blocking or discriminating against traffic to lawful websites. The ruling which impacts “Open Internet” (aka net neutrality) may mean issues for the UFC Fight Pass and WWE Network in the future.
In Verizon v. Federal Communications Commission, the Court held that the FCC is not able to impose “anti-discrimination” and “anti-blocking” rules on Internet providers. The Court ruled that, “…even though the Commission has general authority to regulate…it may not impose a requirement that contravenes express statutory mandates. Given that the [Federal Communications] Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such.”
CNET breaks down the ruling:
In plain English, the court rejected Verizon’s argument that the FCC had overstepped its authority to regulate broadband access, instead acknowledging that the FCC has general authority to impose regulations on broadband and wireless service providers. But because the services these providers offer are classified differently from traditional telecommunication services, the justices reasoned in their decision that they are not subject to the same statutes, which guide the agency in forming its regulatory policies.
The general theory of “Net Neutrality” regulation is to keep a public right of way to access certain services. As stated in the CNET article, for the internet, it means that the infrastructure used to deliver web pages, video and audio-streaming services is open to anyone accessing or delivering the content. It would thus be illegal for an ISP to block a competitor’s internet traffic simply because they are competitors. With the Court ruling, it would seem to imply that blocking competitors may be an option.
If you are a proponent of “net neutrality” what may happen as a result was recognized by the Court in its opinion:
“…broadband providers might prevent their end-user subscribers from accessing certain edge providers (those providing content (i.e. UFC and WWE)) altogether, or might degrade the quality of their end-user subscribers’ access to certain edge providers, either as a means of favoring their own competing content or services or to enable them to collect fees from certain edge providers.”
There was no immediate word whether there would be an appeal of this decision.
So what does this mean from a combat sports perspective? With the UFC Fight Pass and WWE Network relying heavily and essentially depending on internet streaming services in order for its services to be viable, we could see internet providers being able to regulate the bandwidth and streaming of these services. ISP providers may affect UFC and WWE subscribers as identified in the Court opinion. The UFC and WWE might have to “play ball” with these ISP providers in order to obtain the best access to the end-user.
With the ruling occurring today, it’s still too early to know what may happen but MMA Payout will keep you posted.
December 29, 2013
The Eddie Alvarez-Bellator legal saga came to an end this year with Alvarez settling with Bellator and making a triumphant appearance at Bellator 106. The legal case which Alvarez vowed would go to trial settled in time for Alvarez to face Michael Chandler on November 2nd.
As we know the story, Alvarez completed his fight contract with Bellator although the company had “matching rights” which would allow it to keep Alvarez so long as it matched any competing offers. Alvarez and Bellator had agreed that Bellator would get a chance to match the offer made by the UFC. In fact, court documents show that it had cut and paste the UFC contract almost verbatim. Still, Alvarez’s camp argued that the Bellator “match” did not match the UFC contract. Bellator sued Alvarez, Alvarez sued Bellator and Alvarez attempted to file a Preliminary Injunction to allow Alvarez the opportunity to bolt for the UFC. The court denied the PI. The court also denied a motion by Bellator to dismiss Alvarez’s lawsuit against it.
Alvarez proclaimed that he would go to trial to settle this dispute. Other fighters supported Alvarez and Alvarez talked about how Bellator mismanaged some of its fighters. For this, Bellator head, Bjorn Rebney had to go into damage control to explain some of the issues Alvarez had highlighted.
The case would not have gone to trial until late 2014 at the earliest.
Alvarez went on a PR march claiming the Bellator had attempted to alter a document regarding the matching terms of his contract. In fact, Alvarez produced the document (and the attempted “blacking out” of his address which you could still see) but it did not lend much to his theory.
Fortunately, Alvarez agreed to terms with Bellator which, in the end, likely saved Bellator 106. Alvarez did not speak about the terms of his return to Bellator and his return was marked by this odd interview with Alvarez by Glenn Robinson’s daughter.
The lawsuit likely served as a guide for contractual dealings with Ben Askren. The Welterweight champ was let go by Bellator even though the organization had matching rights in its contract with Askren. Despite the fact Bellator let its champ go, it was less of a public relations issue than if it became mired in another lawsuit.
The court documents revealed the UFC contract and its PPV buy structure. While these terms may have been released in the past, it was still interesting to look at the UFC’s structure in how fighters are paid based on PPV buys. It also showed some of the added benefits Bellator was willing to give Alvarez if he stayed which included guests spots on Spike TV programming. But, the key issue was the PPV upside that Alvarez would receive if he joined the UFC. Earlier this year, Bellator had not put on a PPV although there were vague notions that it would put on a show. As we know, it eventually announced a PPV to be headlined by Rampage Jackson versus Tito Ortiz. We all know how that turned out.
There was also Dave Meltzer’s Declaration in support of Eddie Alvarez’s Preliminary Injunction. Meltzer indicated PPV buy rates in his declaration to support Alvarez’s initial argument that Bellator did not match the UFC’s contract. If the case would have proceeded and came closer to trial, Meltzer would have been deposed and/or testified at trial. Attorneys would be able to inquire about how he substantiated PPV buy rates including such information as where he gets his information and if there is a formula for his PPV analysis. Certainly, Meltzer could have claimed that he does not need to reveal his sources based upon his journalistic ethics. Yet, it would have created an interesting scenario. But, once again, the settlement saved this issue.
And, in the end, Meltzer was right about the “matching” thing.
The fact that Bellator cancelled its PPV after Ortiz’s injury shows that it did not believe Alvarez could headline a PPV (or it did not have enough time to market Alvarez as its top star). Regardless of the reasons for turning the PPV into a card on Spike TV, the cancellation of the PPV may have confirmed what Alvarez may have known throughout: that Bellator was not the same as the UFC.
December 24, 2013
Another year, another full-court press by Zuffa to hold an event in New York….another disappointment. The Southern District of New York ruled on New York’s Motion to Dismiss and found in favor of the state and dismissed all of Zuffa’s claims except for its claim that the existing statute banning professional MMA in the state is unconstitutionally vague.
The dismissal severed a huge chunk of Zuffa’s case against the state which was originally filed in November 2011. While Zuffa attempted to spin the news, the fact that it now has only one claim in its lawsuit has to be damaging for its possibility of success. To give a snapshot of the glacial pace of this litigation, New York filed its Motion to Dismiss Zuffa’s lawsuit in October 2012 and a hearing on the Motion was not heard until February 2013. And then, the ruling did not come out until September 30, 2013.
Notably, the Court dismissed Zuffa’s claim under the First Amendment citing that the central question in determining First Amendment protection was whether the activity was primarly communicative and expressive. The Court claimed that the fighters lacked the “essential communicative elements” for a claim under the First Amendment.
At this point, the parties have provided the Court with a “Scheduling Order” detailing deadlines for written discovery and depositions. New York has identified the named Plaintiffs as potential people to depose which includes Frankie Edgar and Jon Jones. It is intended that they will need to be deposed by March 7, 2014 according to a Court filing.
Where will the Court case go? After discovery, it’s likely that we see New York attempt to make a case to bring a summary judgment motion to dismiss Zuffa’s remaining claim. If Zuffa survives another motion to dismiss its case, we will likely see a trial sometime in 2014. Even if it is found that the MMA ban is unconstitutional, it’s likely the state of New York would have to draft legislation allowing professional MMA in the state and how it would be regulated.
The ongoing legal saga is just another chapter of Zuffa attempting to legalize MMA in New York. Despite its usual confidence at the beginning of the legislative session in Albany, there was no vote for MMA once again. The UFC had claimed to have secured Madison Square Garden in November for its 20th Anniversary show but the date came and went. Whether or not the Culinary Union of Las Vegas played a part, or whether a sexual discrimination claim played a part, Zuffa is spinning its wheels. In July, it was revealed that it had contributed $35,000 to New York Legislators since the start of the year. Notably, it spent $330K on federal lobbying efforts this year. This is down from $620K on lobbying efforts in 2012.
While most MMA fans believe that the UFC will be in New York one day, the company continues to strike out when trying to make inroads into the state. We will see what can be done this spring in Albany and what movement happens with the court case
December 17, 2013
With the announcement of Vitaly Klitschko vacating the World Boxing Council’s heavyweight championship belt to focus on his homeland, it leaves open the issue of another boxer’s future Bermane Stiverne.
Stiverne, a heavyweight contender, has sued Don King and his promotional company under the Muhammad Ali Act contending violations of the Act by Don King Productions (“DKP”) and other associated entities. Specifically, Stiverne contends that he was forced to sign an exclusive promotional agreement with DKP in order to receive fights.
Last week, the Court in the Southern District of New York denied Stiverne’s request for a Preliminary Injunction and Temporary Restraining Order. The requested relief asked that the Court enter an Order to request DKP among other defendants “not to interfere in any way, directly or indirectly, with the ability of plaintiff…to enter into any bout agreement with any other boxer, including for a heavyweight championship bout.” Stiverne is considered the number one contender for the WBC’s heavyweight championship belt. According to Court documents, Stiverne’s manager was working with the Klitschko management team to negotiate and sign a bout agreement. Stiverne’s concern was that King will intercede.
The Preliminary Injunction came as a result of alleged threats made by King that “he would do everything in his power to prevent Stiverne from getting any more boxing bouts whatsoever.”
In addition to Stiverne’s Motion for Preliminary Injunction and Temporary Restraining Order, the Court further ordered that the parties are instructed to submit letters by Friday, December 20, 2013 updating the Court on the status after a mediation session before the WBC. The mediation session was to negotiate a fight contract between Stiverne and Klitschko. Since Klitschko has given up his title, there will be no meeting and the Court must now address what to do next in Stiverne’s lawsuit.
DKP has filed its Answer and Counterclaims to Stiverne’s lawsuit requesting declaratory relief from the Court to invoke the purported promotional contract between Stiverne and DKP. In addition, DKP claims Stiverne has breached its contract and tortuously interfered with DKP’s rights under the 2011 Promotional Agreement.
Reviewing Stiverne’s request for the Preliminary Injunction and Temporary Restraining Order, it seemed like a longshot that the Court would grant his motion. With the announcement that Klitschko has given up his belt, it puts Stiverne’s career options up in the air. But, the lawsuit brings up the question of the bite of the Ali Act.
Stiverne must now address Counterclaims for breach of contract and tortious interference with a contract. These claims coincide with the promotional contract that Stiverne signed but the fighter claims was done under pressure. There are few lawsuits that have been brought under the Ali Act and even fewer where a fighter prevails (I actually count none) under the Act. So, while there are portions of the Act which allow for private rights of action, from a practical standpoint, most boxers are not in the position to pay lawyers to litigate these claims. Even then, in situations like this where a promotional contract is disputed, there is the threat of a countersuit from the promoter for breach of contract. Thus, the fighter is put in a situation where he could find himself defending a lawsuit.
While the purpose of the Ali Act has good intentions, one must wonder if it should be amended to allow for better ways to resolve disputes short of costly litigation.
October 7, 2013
According to court documents filed in the U.S. District Court in Delaware , Bankrupt video game maker THQ is suing Zuffa and Electronic Arts, Inc. (EA) stating that EA had informed Zuffa of THQ’s shaky finances as EA and Zuffa worked together to so that EA could acquire the license to UFC video games. The Complaint was filed last Friday.
The issue goes back to 2006 when EA expressed interest in acquiring the UFC video game franchise from Zuffa. However, court documents stated that, “EA made what Zuffa considered to be an insultingly low offer for the UFC video game rights and was rejected.”
In 2009, THQ developed “UFC 2009 Undisputed” and it was a success selling over 3.5 million units. Despite the success two years prior, THQ’s finances declined in 2011 and the company determined that it would be unable to support its projects including the next games in the UFC franchise.
In 2011, THQ and EA discussed a potential sale of THQ as a whole to EA. According to court documents, “THQ provided EA internal financial information including detailed sales and revenue figures for the UFC Franchise, and projected marketing expenditures on the next UFC Franchise game.” Despite initial interests, EA broke off negotiations with THQ in December
2013 2011 citing disinterest.
Two weeks later, Zuffa criticized THQ about its expenditures and threatened to terminate its relationship with THQ based on its insolvency. There had been no prior evidence of dissatisfaction with THQ.
THQ entered into a $10 million settlement with Zuffa in exchange for the termination of its license and all intellectual property rights to the UFC game brand in 2012. However, THQ now claims that this was a fraudulent transfer as it believes that EA had contacted Zuffa and conveyed the internal financial information it was provided by THQ during the potential sale of THQ. THQ claims that it was “hamstrung” in negotiations with Zuffa due to its knowledge of THQ’s finances and the actual value of the UFC video game franchise was $20 million.
UPDATE 10/08/13: Some more info from the Complaint
EA Sports MMA was released in June 2009. You may recall that it featured the Strikeforce plus Randy Couture. This included Fedor, Nick Diaz, Jacare Souza and others. It also featured Bas Rutten as a trainer in the game. A hidden game feature was discovered where a player could create their own MMA fighter and could enable a player to create UFC fighters with the same tattoos, shorts, hairstyles, etc. Zuffa discovered this issue in late November 2010 and notified EA of its objection to the use of UFC licensed fighters. In March 2011, EA agreed to patch the game feature so that you could no longer recreate UFC fighters in the EA Sports MMA game.
Paragraph 19 indicates that after a “December 12, 2013 high-level meeting” negotiations between THQ and EA broke off. Obviously, the Complaint likely meant December 12, 2011 as Zuffa sent the demand letter to THQ on December 30, 2011.
The basic claim here is that THQ is claiming that when it had entered into negotiations to sell itself to EA due to financial troubles, it revealed confidential financials to EA as EA was doing its due diligence before the potential acquisition. Once acquisition talks failed THQ claims EA took what it had known about THQ finances and sent it to Zuffa. As many recall, EA had developed EA Sports MMA which did not do well because it did not have recognizable UFC names in its game. Thus, THQ argues there was reason why EA wanted Zuffa to terminate its relationship with THQ.
EA is set to unveil a new UFC game, “EA Sports UFC” this spring.
The Bankruptcy laws are a little complex and THQ is asking the Bankruptcy trustee to undo the authorized settlement to Zuffa as it was not market value. It also argues that EA tortuously interfered with its UFC contract by divulging confidential information to Zuffa.
MMA Payout will keep you up to date with this situation as it progresses.
October 5, 2013
Earlier this week, Judge Kimba Wood of the US District Court for the Southern District of New York issued a 44 page opinion dismissing 6 of the 7 claims brought by Zuffa in its lawsuit against the state regarding its legislation banning professional MMA. Zuffa’s claim that the MMA regulation is unconstitutionally vague is the only claim that survived the Motion to Dismiss.
The Motion to Dismiss was filed in October of 2012 and heard in February of this year. Notably the Motion to Dismiss is based on Federal Rule of Civil Procedure 12 (b)(6) which allows a court to grant a party the right to dismiss claims if there is “a failure to state a claim upon which relief can be granted.” In order to survive a 12(b)(6) motion, the claims “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.”
In this case, the Court found only Zuffa’s claim that the NY ban is unconstitutionally vague survived.
We note that the Court dismissed Zuffa’s First Amendment claim as the Court sided with New York. The Court held that the central question in determining First Amendment protection was whether the activity is primarily communicative and expressive. The Court held that MMA “lacks such essential communicative elements.” In a Footnote to the Opinion, the Court stated, “The fighters’ pre-fight and post-fight antics do not change the Court’s conclusion that the core conduct at issue – live MMA combat between professionals – does not qualify for First Amendment protection.” The Court concluded that it is MMA, not the surrounding fanfare that must convey the particularized message.
The sole claim standing after the Court’s ruling was its cause of action that the professional MMA ban in New York was unconstitutionally vague. The Court held that this claim could go forward. One of the interesting reasons was due to oral arguments of this motion in which New York’s attorney indicated that the law in question could feasibly see an exempt organization (as defined in the law) regulate pro MMA events in the state. It also did not agree with New York’s argument that the legislative history trumped the statutory language. In light of the varying interpretations of the statutory language, the Court found that Zuffa has adequately alleged its claim for vagueness.
The UFC sent out a press release stating that it was pleased with the Court ruling. It’s an interesting spin on the Court dismissing most of your case. While Zuffa left open the possibility of appealing the Court ruling related to its First Amendment claim, it would wait and see what happens to the vagueness claim.
At this point, the parties begin the discovery phase (written questions, request for production of documents, depositions) with the intent that this case move to trial. With no trial date set, this process could drag on. Furthermore, there’s nothing which would preclude New York in attempting to move for summary judgment after discovery which would again attempt to dismiss Zuffa’s claim before trial. We could also see the Court stepping in to force the parties to mediation.
Even if this case is tried and the Court strikes down the law and Zuffa wins, it still would mean that it would have to go to Albany to get professional MMA regulated within the state. Without a new law in place, New York would go unregulated. In its press release, the UFC had called for a “new law on MMA” in New York. Thus, all roads still go through Albany.
We will see what happens from here. As always, MMA Payout will keep you posted.
October 2, 2013
According to the New York Post, Judge Kimba Wood has dismissed Zuffa’s claim that the New York law banning MMA violates the First Amendment. Judge Wood did leave Zuffa’s claim that the New York law could be unconstitutionally vague.
MMA Payout will have more on this later today.
September 12, 2013
How much do UFC fighters receive for having their likenesses in video games? If you’re Carlos Condit its $22,500. This was revealed in a lawsuit filed by Condit’s tattoo artist against the makers of the UFC video game according to The Hollywood Reporter.
The legal wrangling arises out of the THQ bankruptcy and the bankruptcy court’s valuation of a copyright infringement claim by Condit’s tattoo artist, Christopher Escobedo. Condit’s lion tattoo over his rib cage is displayed in the video game, UFC Undisputed. Escobedo inked the tattoo on Condit.
Since THQ is in Chapter 11 bankruptcy, the lawsuit that was originally filed in Arizona Federal Court came under the jurisdiction of the Bankruptcy Court. Escobedo’s original complaint requested damages in the amount of $4.16 million which was 2% of all post-bankruptcy petition sales.
Escobedo’s rationale for the hefty amount was based on the sales of the game (4.1 million units of the game sold), that Condit was a popular fighter (as he was the interim Welterweight champ at the time) and Condit’s character appeared in the video game with the visible image of the lion tattoo. Escobedo’s lawyer argued that the Court should take into consideration what a hypothetical negotiation would produce between Escobedo and THQ. The Bankruptcy Court did not agree and determined the value to Escobedo was the same amount that Condit was paid for his likeness: $22,500. Even after a motion for reconsideration, the Court was not swayed.
The Court provided this guidance as to its ruling:
“As THQI demonstrated, the value of Escobedo’s claim must be reduced to reflect (a) the exceedingly low value of a license of a single tattoo to a game depicting more than a hundred fighters, hundreds of tattoos and songs, and myriad other creative elements, (b) the likelihood that a tattoo on another person’s body is not copyrightable, (c) the likelihood that Condit has an implied license to license to THQ his own digital image (including an image of the Lion Tattoo), without restriction by a tattoo artist; and (d) the likelihood that, if the Lion Tattoo is copyrightable, Condit would have to at least be considered a joint author of the tattoo with an equal right to license it to others.”
Tattoo copyright issues is starting to become a concern and has drawn notice from the NFL and its player’s union due to potential liability issues. Its an interesting question as to 1) who own’s the copyright on the tattoo? 2) whether the actual artist should be compensated for its depiction? 3) what are the rights of the individual that actually has the tattoo?
But maybe the first question is whether a tattoo deserves copyright protection. While most legal analysts believe that a tattoo can be copyrightable, one has to consider whether the individual sporting the ink has an implied license once they leave the tattoo parlor. One of the proposed ways to address the situation is to have tattoo artists sign waivers for their work and/or compensate the artists in other ways (autographed ball, shorts or maybe tweeting out the work with the artist’s handle). It appears that most times that level of publicity is want the artists wants for business.
The one other takeaway from the Escobedo claim is that Condit received $22,500 for his likeness in the video game which makes one consider the pay of other lesser and more known fighters in the video game. Its another area of compensation in addition to actual fighting.
August 26, 2013
It is well known that Zuffa is an aggressive defender of its intellectual property. It found itself in an unenviable position as the company it hired to issue DMCA takedown requests issued notices to child pornography sites claiming that Zuffa was the lawful rights holder.
IP Arrow, the company that Zuffa hired to do this work is an anti-piracy company that represents over 10,000 of Zuffa’s copyrights. Its latest reported request on August 23, 2013 has it making takedown requests of over 131 URLs. IP Arrow has been identified as a company owned by Morganelli Group LLC.
According to tech blog, Techdirt.com, “IP Arrow is issuing takedown links to files that appear to be child porn while making the claim that Zuffa/UFC hold the copyright to these photos.”
More from Techdirt.com:
Judging from the quality of the DMCA notices it’s issued, IP Arrow either has no idea what it’s doing or just doesn’t care. What’s worse is that its submitted links have been taken down nearly 100% of the time, despite the fact that its DMCA notices are loaded with content its clients don’t own.
The DMCA takedown notices request the online service provider (e.g. Google) take down the offending material and that it makes a sworn statement that it has a “good faith belief is not authorized by the copyright owner” and that the notification is accurate, and under penalty of perjury, that the complaining party is authorized to act on behalf of the owner of an exclusive right that is allegedly infringed” See 17 U.S.C. sec 512(c)(3)(v)-(vi).
Techdirt had attempted to contact Zuffa about these takedown notices but had not received response. It had heard from Lynda.com, another client of IP Arrow, which issued the following statement which we might assume may be the same position Zuffa would take:
…On our behalf, IP Arrow issues batch DMCA takedown notifications for links to directories containing our content. Those links often contain keywords designed to drive traffic to adult or illegal material in directories that happen to also contain lynda.com videos. Many of the URLs highlighted in this TechDirt story, implied to be targets of erroneous takedowns, at one time contained our files but no longer do.
It would be easy to conclude that the UFC may argue the same thing. At one time, the sites targeted by IP Arrow – including the porn sites, had keywords which may have included Zuffa content. Therefore, the takedown notices would not appear as arbitrary as it might seem. Nevertheless, its hard to fathom that all of the sites that are being taken down contained Zuffa-owned material.
Based on a look at some of the takedown notices sent out by IP Arrow, we may assume that Zuffa never held a copyright interest in any of the sites. Moreover, from a PR standpoint, the practice of sending out blanket notices, especially to porn sites may look as though it is tied to these sites. This is something it likely does not want to have happen. What we may surmise is that these takedown notices were incorrectly aggregated. Thus, the notices were likely made to sites that did not infringe UFC copyrights, another bad scenario.
But, the “whac a mole” strategy may have turned into a “excavate the earth” as IP Arrow is using a broad stroke in taking down any sites remotely linked to Zuffa. Is Zuffa taking advantage of the system by issuing these notices? Will this strategy show any results? Or, will it just be a useless exercise in taking down sites that will “pop-up” somewhere else?
August 21, 2013
ESPN’s Josh Gross reports that Bellator will let Ben Askren leave for the UFC if Dana White wants the welterweight standout. Bellator head Bjorn Rebney told ESPN that it would not make an offer to Askren.
Askren’s last contracted fight was this past July. Similar to Alvarez, its believed that Bellator has the right to match any contract offered to Askren. However, it appears that it is passing. The news was surprising considering Askren’s record and perhaps not surprising considering Askren’s wrestling-heavy, grinding style which is not exciting. After a bitter legal battle with Eddie Alvarez,which ended in a settlement and Alvarez coming back to Bellator, the company has made a decision on Askren.
When asked about whether Askren would be on Bellator’s first PPV in November he indicated that there would be “no chance.” Thus, it was likely that the parting was mutual.
Askren has already been in contact with Dana White via twitter:
— Ben Askren (@Benaskren) August 21, 2013
Askren is a dominant wrestler and a personality but his style may have been a reason Bellator has decided to give up on re-signing him. However, Bellator needs top level talent for the company and the PPV. Askren is dominating and Bellator could have utilized this. Perhaps Bellator saw another Alvarez situation on the horizon and thought best to let him go rather than get embroiled in another costly lawsuit. We will see if Askren does end up in the UFC and how his talent does in the UFC’s welterweight division.